Deferred Payment Loan Calc

Deferred Payment Formula:

\[ \text{New PV} = PV \times (1 + r)^d \] \[ PMT = \text{New PV} \times \frac{r}{1 - (1 + r)^{-n}} \]

Initial Principal (PV):

USD

Annual Interest Rate:

Deferment Period:

months

Amortization Term:

months

Adjusted Principal After Deferment:

Monthly Payment (PMT):

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From:	To:

1. What is a Deferred Payment Loan?

A deferred payment loan allows borrowers to postpone payments for a period while interest continues to accrue. Common in student loans, mortgages, and some personal loans.

2. How Does the Calculator Work?

The calculator uses two formulas:

\[ \text{New PV} = PV \times (1 + r)^d \] \[ PMT = \text{New PV} \times \frac{r}{1 - (1 + r)^{-n}} \]

Where:

\( PV \) — Initial loan principal (USD)
\( r \) — Monthly interest rate (annual rate ÷ 12)
\( d \) — Deferment period in months
\( \text{New PV} \) — Adjusted principal after deferment
\( n \) — Amortization term in months
\( PMT \) — Monthly payment amount

Explanation: First calculates the new loan balance after deferment, then computes the payment needed to amortize that balance over the repayment term.

3. Importance of Deferment Calculations

Details: Understanding the true cost of deferment helps borrowers make informed decisions about loan terms and repayment strategies.

4. Using the Calculator

Tips: Enter the original loan amount, annual interest rate, deferment period, and desired repayment term. All values must be positive numbers.

5. Frequently Asked Questions (FAQ)

Q1: Does interest capitalize during deferment?
A: Yes, this calculator assumes interest compounds monthly during deferment and capitalizes to the principal.

Q2: How does deferment affect total loan cost?
A: Deferment increases total interest paid because interest accrues on a growing principal balance.

Q3: Are there loans with interest-free deferment?
A: Some subsidized loans (like federal student loans) may not accrue interest during specific deferment periods.

Q4: What's the difference between deferment and forbearance?
A: Deferment often has specific qualifications and may not accrue interest (for subsidized loans), while forbearance typically always accrues interest.

Q5: Can I make payments during deferment?
A: Some lenders allow voluntary payments during deferment which would reduce the capitalized interest.